Distressed financial firm B. Riley is planning the sale of its majority stake in Great American Group to reduce its leverage and try to stabilize its embattled business, according to Bloomberg.
Shares were up almost 15% in early trade on the news before paring gains with the broader market.
The Los Angeles-based company is negotiating the sale and has a non-binding financing agreement for its B. Riley and bebe brands businesses.
These deals could raise $410 million, which B. Riley plans to use to reduce its debt with Nomura Holdings to $125 million by the end of 2024, according to Bloomberg.
The company has been under relentless attack from short sellers for its business practices and is trying to manage $2 billion in debt, federal investigations into its financial reporting, and a substantial second-quarter loss.
The firm is under investigation by the SEC regarding its asset disclosures and dealings with Brian Kahn, former CEO of Franchise Group Inc. Riley and Kahn have denied any wrongdoing, and B. Riley is cooperating with the SEC.
The firm was recently forced to cut its dividend to focus on debt reduction and aims to repay senior notes due in February 2025 through asset sales and cash on hand. B. Riley also expects to amend its credit agreement with Nomura.
Bloomberg reports that Chairman and Co-CEO Bryant Riley said the company is seizing the opportunity to monetize assets to accelerate debt repayment.
Previous reports have suggested Oaktree Capital is negotiating a stake in Great American, and B. Riley is discussing debt amendments with lenders.
Founder Bryant Riley has also made an informal offer to take the company private for $7 per share, and a special committee of independent directors is reviewing the proposal.
B. Riley is also dealing with a controversial $500 million loan arranged by Nomura, backed by assets now expected to be written down by up to $370 million. This includes a loan to Kahn secured by Franchise Group shares.
Nomura has faced pressure to reassess the loan’s value but has so far taken no action, Bloomberg wrote.
